Roger Bootle - Capital Economics

[DONTDOITMAN]

Hi Guys,

I have just been at a presentation with Robert Bootle - Capital economics who predicts house prices to fall by 35% on the homepage.

I found him to be a very interesting man, was a great speech.

He explained how we got into this mess in the first place, eg. low interest rates to increase GDP to compete with China and how he blamed the government policy of tracking inflation as wasn't a stabilising tool "pain on the way up and pain on the way down".

He also explained that equities wont crash with the housing market and economy because of the DOTCOM crash, and thus already had their crash. He thought inflation would increase to 4.5 % and if it stayed over 4% for a significant period of time said it would be "Armageddon". He then said inflation would then drop to 1% and interest rates to drop lower than those in the 1930's....I think 2% and then the cycle would start again. Unfortunately he didn't say any time frames and the Q&A session was cancelled because we ran out of time.

Anybody else got to go to one of his presentations? The man is a legend!

Edited July 8, 2008 by DONTDOITMAN

[interestrateripoff]

Lower interest rates did not allow us to compete with China, low interest rates just meant we bought a load of crap from China that we didn't need. This selling in shops increased GDP.

Wow he's a genius for saying it will start all over again, been looking at the history books has he

[Guest pioneer31]

Wise after the event.

[DONTDOITMAN]

When Roger was being bearish about house prices, inflation and interest rates everybody who was watching was shocked

I was the only one smiling

Edited July 8, 2008 by DONTDOITMAN

[RajD]

Doesn't seem like that much of a legend to me:

I have just been at a presentation with Robert Bootle - Capital economics who predicts house prices to fall by 35% on the homepage.

More like 50%+, but of course, that's a matter of opinion.

He explained how we got into this mess in the first place, eg. low interest rates to increase GDP to compete with China and how he blamed the government policy of tracking inflation as wasn't a stabilising tool "pain on the way up and pain on the way down".

This 'mess' has been caused by a credit super-bubble that has been pumped up by central banks (primarily the US federal reserve) for nearly 4 decades. The main aim of lowering of interest rates is to encourage borrowing and hence spending to enable the money supply to continue to grow to enable outstanding debt obligations to be fulfilled, while simultaneously necessitating continued consumption or GDP growth in the future. By some protracted way of thinking, exponential GDP growth is assumed to be desirable, when in fact, if the total amount spent on goods and services this year was the same as last year, but those goods and services were relatively cheaper this year, so we consumed more goods and services this year, we would by that definition have achieved economic growth at the same cost even though GDP would be 0%. The only reason economic growth is defined by GDP comparisons year-on-year and an ever-increasing GDP is portrayed as being good is because ever-increasing consumption is a necessary requirement of a fiat monetary system.

He also explained that equities wont crash with the housing market and economy because of the DOTCOM crash, and thus already had their crash.

?? Phew. We had a housing crash in the early 90s - so we're ok - we won't really have one now. Errr, hold on - that's slightly convoluted logic. As the economy slows down and companies' profits drop, so will share dividend payouts, which - as we have been seeing might encourage people to sell, sell, sell. Some companies - e.g. property development, home furnishing, banks, etc. will be wiped out - just as happened to technology and ecommerce companies in the dotcom crash. Happening as we speak.

He thought inflation would increase to 4.5 % and if it stayed over 4% for a significant period of time said it would be "Armageddon". He then said inflation would then drop to 1% and interest rates to drop lower than those in the 1930's....I think 2% and then the cycle would start again. Unfortunately he didn't say any time frames and the Q&A session was cancelled because we ran out of time.

He's a certifiable idiot if he thinks inflation is anywhere around 4%, or is going to drop to 1%. Lucky he ran out of time before Q&A. He'd have received an ass-whupping.

Edited July 8, 2008 by RajD

[The Bachelor of Arts]

Doesn't seem like that much of a legend to me:

More like 50%+, but of course, that's a matter of opinion.

This 'mess' has been caused by a credit super-bubble that has been pumped up by central banks (primarily the US federal reserve) for nearly 4 decades. The main aim of lowering of interest rates is to encourage spending to enable the money supply to continue to grow to enable outstanding debt obligations to be fulfilled, while simultaneously necessitating continued consumption or GDP growth in the future. By some protracted way of thinking, exponential GDP growth is assumed to be desirable, when in fact, if the total amount spent on goods and services this year was the same as last year, but those goods and services were relatively cheaper this year, so we consumed more goods and services this year, we would by that definition have achieved economic growth at the same cost even though GDP would be 0%. The only reason economic growth is defined by GDP comparisons year-on-year and an ever-increasing GDP is portrayed as being good is because ever-increasing consumption is a necessary requirement of a fiat monetary system.

?? Phew. We had a housing crash in the early 90s - so we're ok - we won't really have one now. Errr, hold on - that's slightly convoluted logic. As the economy slows down and companies' profits drop, so will share dividend payouts, which - as we have been seeing might encourage people to sell, sell, sell. Some companies - e.g. property development, home furnishing, banks, etc. will be wiped out - just as happened to technology and ecommerce companies in the dotcom crash. Happening as we speak.

He's a certifiable idiot if he thinks inflation is anywhere around 4%, or is going to drop to 1%. Lucky he ran out of time before Q&A. He'd have received an ass-whupping.

Well said. My thoughts exactly

[interestrateripoff]

Nope is it any good?

The only way we could ever compete with China would be to slash costs from wages to rents etc.... Or have a massive round of deflation.....

[thecrashingisles]

Can anybody who has posted here please tell me if they have read "Money for Nothing" by Roger Bootle?

I've read it. It's one of the things that influenced me not to buy in 2004.

[The Masked Tulip]

I bought his 'Money For Nothing' book a few years back - great ideas but his writing style is like wading through treacle IMPO. IIRC the hairdressers and holistic therapists are going to inherit the earth or something like that.

[BandWagon]

Can anybody who has posted here please tell me if they have read "Money for Nothing" by Roger Bootle?

Yes, I want my money back.

[The Masked Tulip]

Yes, I want my money back.

Me too. Would never buy another one of his books unless he gets a really good ghost writer. Treacle!

[the end is a bit nigher]

If it all comes to pass we'll be able to buy a bloody good house virtually interest free in a couple of years. Sounds reasonable.

[Optobear]

He also explained that equities wont crash with the housing market and economy because of the DOTCOM crash, and thus already had their crash.

[ \quote]

Interesting. Certainly true that DOTCOM brought down NASDAQ and tech shares, but had much smaller effect on the DOW. ( non-tech shares). I don't think DOTCOM was the main story regarding crashing.

Recently there has been a lot of trailing of programmes about the 3rd world trade center building, and the delays in its collapse. It got me thinking about the delayed effects of 9/11. The previous Governor of the BoE said that they very deliberately dropped rates in the aftermath of 9/11 to prevent an economic collapse at that point. Interesting to speculate as to whether the economic collapse, that we seem to be teetering on the edge of, was actually a consequence of those planes crashing into the WTC? Certainly if history shows that the hijacking of three planes led to a massive credit bubble, which in turn led to collapse of large parts of the capitalist economy, then it will be seen as the most effective and damaging terrorist action ever. Scary thought.

[Moo]

It got me thinking about the delayed effects of 9/11. The previous Governor of the BoE said that they very deliberately dropped rates in the aftermath of 9/11 to prevent an economic collapse at that point. Interesting to speculate as to whether the economic collapse, that we seem to be teetering on the edge of, was actually a consequence of those planes crashing into the WTC? Certainly if history shows that the hijacking of three planes led to a massive credit bubble, which in turn led to collapse of large parts of the capitalist economy, then it will be seen as the most effective and damaging terrorist action ever. Scary thought.

Can safely say I share that view, although it took me a little while to spot it. What I always wondered was what would have happened had there been no rate cuts, and (domestically) Gordon hadn't ramped up the borrow-n'-spend? Would we have seen a recessionette, with slight house price falls then? Looking back at the cuts they made then, it doesn't seem unreasonable to conclude that they significantly over-reacted, and only "got away with it" in the quite shortish term as a result of it coinciding with the full force of the whole China-effect-most-stuff's-getting-cheaper-and-manufactured-goods-inflation-ain't-domestic-no-more-bubba thing.

Note : Not being tin-foil hatty there, I just think it's an interesting, and potentially significant series of events. Oh, the joys of unintended consequences.

[oracle]

Nothing to do with tin foil hats.

EVERYTHING to do with the business cycle.

martin armstrongs pi cycle sums it up VERY accurately.

8.6 years is the magic number.

let's rewind 8.6 years from 9/11......you arrive at end of feb 1993.

what happened then?....well we had the first wtc bombing,and the ramp up of tech shares.

now lets fast forward 8.6 years from 9/11.....we get to late-ish march 2010.(22nd-24th march to be precise)

....what's going to happen then?

fred harrison seems to think we're getting into a depression in 2010,and another event,probably somewhat larger in magnitude than the previous would certainly be a catalyst.

[Tartaglia]

Presumably the 8.6 years is the juglar cycle. I'm not sure I would quote it to decimal points though